Correlation Between Sp Smallcap and Technology Fund

Can any of the company-specific risk be diversified away by investing in both Sp Smallcap and Technology Fund at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sp Smallcap and Technology Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sp Smallcap 600 and Technology Fund Investor, you can compare the effects of market volatilities on Sp Smallcap and Technology Fund and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sp Smallcap with a short position of Technology Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Technology Fund.

Diversification Opportunities for Sp Smallcap and Technology Fund

0.78

Correlation Coefficient

Sp Smallcap  Technology Fund

Poor diversification

The 3 months correlation between RYWAX and Technology is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 and Technology Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Fund Investor and Sp Smallcap is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sp Smallcap 600 are associated (or correlated) with Technology Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Fund Investor has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Technology Fund go up and down completely randomly.

Pair Corralation between Sp Smallcap and Technology Fund

Assuming the 90 days horizon Sp Smallcap 600 is expected to generate 0.75 times more return on investment than Technology Fund. However, Sp Smallcap 600 is 1.34 times less risky than Technology Fund. It trades about -0.08 of its potential returns per unit of risk. Technology Fund Investor is currently generating about -0.08 per unit of risk. If you would invest  5,128  in Sp Smallcap 600 on December 22, 2024 and sell it today you would lose (336.00) from holding Sp Smallcap 600 or give up 6.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sp Smallcap 600  vs.  Technology Fund Investor

Sp Smallcap 600

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp Smallcap 600 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Technology Fund Investor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Technology Fund Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Sp Smallcap and Technology Fund

The main advantage of trading using opposite Sp Smallcap and Technology Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Smallcap position performs unexpectedly, Technology Fund can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Technology Fund will offset losses from the drop in Technology Fund's long position.

The idea behind Sp Smallcap 600 and Technology Fund Investor pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.